South Korea’s bulk carrier Korea Line Corp., owned by Samra Midas (SM) Group, outbid bigger local rival Hyundai Merchant Marine Co. to win over the Asia-U.S. operation of bankrupt Hanjin Shipping, once the country’s largest container liner that became the latest casualty case in an industry swamped by global-wide slowdown and overcapacity.

The Seoul bankruptcy court handling reorganization of Hanjn Shipping chose Korea Line as a preferred bidder and plans to close the deal at around 100 billion won ($85 million) on November 21.

The acquisition would make relatively less-known SM Group emerge as the second largest oceangoing liner of the country whose economy heavily relies on external trade. The outcome would be an upset to the government’s envisioning of breeding Hyundai Merchant Marine, the second largest liner state lenders chose to save while cutting the life line for Hanjin Shipping, as the primary sea flag carrier by having it add remaining lucrative assets of Hanjin.

The court found SM better positioned financially and reliable to guarantee jobs of the staff on the sea route as Hyundai Merchant Marine depends on short-term credit and public funds from state creditors.

SM Group makes a rare bold newcomer defying the general streamlining and downsizing trend in the shipping sector that has been struggling both locally and globally due to heavy leveraging during the boom years and fierce competition.

The name joined the shipping community after the group took over Korea Line that went under bankruptcy protection in 2011 following the 2007-2008 global financial crisis that sent many oceangoing members to go under. The group also acquired a 73.8 percent stake in mid-sized bulk carrier Samsun Logix Corp. plus management right in September last year. It can now add five 6,500 twenty-foot equivalent (TEU) containerships of Hanjin Shipping to its fleet currently consisting of bulk freighters, tankers, and motor vehicle carriers.

About 63 percent of revenue for Korea Line sales comes from transporting unpackaged bulk cargo such as grains and coal for companies like Hyundai Govis Co., Korea Electric Power Corp., and Posco. The shipper can now add cargo trade to its business portfolio and could benefit from transporting multiple warehouse goods that fetch higher fees than bulk cargo.

After winning the operating right of the Asia-U.S. shipping route, Korea Line is now eligible to buy out Hanjin Shipping’s 54 percent stake in the Long Beach Terminal in California that handles more than 30 percent of cargo along the U.S. West Coast. But it must first persuade the terminal’s second largest shareholder Mediterranean Shipping Co. based in Switzerland that has the priority right to purchase Hanjin’s stake in the terminal.

At 1:25 p.m. shares of Korea Line fell 11.32 percent to 16,850 won in Seoul trading Tuesday.

By Kim Jung-hwan and Kim Yoon-jin

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]